(MintPress) – As student debt totals surpass $1 trillion, a Boston University economics professor, Kevin Lang, is warning that the government must increase its efforts to decrease the cost of higher education nationwide or the United States will see many students opting not to go to college.
“People are looking at the very high economic returns from graduating college despite the tough labor market for recent college graduates,” Lang said. “But weighing against that is the concern about the risk — ‘what if I don’t get a job, what if I don’t get a good job and I have all these student loans?’”
According to the Associated Press, the Federal Reserve Bank of New York says more than 31 percent of people with student loans at the end of last year were 90 or more days delinquent. That compares with less than 25 percent at the end of 2008.
In a report from the Center for American Progress, the group recommended that federal policymakers “enact meaningful reforms that include an interest rate reduction and provide a way for private loan borrowers to consolidate their debt into the federal student loan program.”
Worries about mounting loan debt has led to a plethora of students taking extreme measures in recent years to decrease and/or pay back their student loans, likely due to the fact that student debt has tripled over the past eight years, according to the New York Federal Reserve.
Part of the added stress with student loans is that once a person defaults on a student loan, the balance grows exponentially. Edie Irons, a spokeswoman for The Project on Student Loan Debt, said many college students with private loans are increasingly turning to bankruptcy court for relief. However, unlike credit card, car insurance or gambling debt, it’s impossible to “wipe the slate clean” by declaring bankruptcy, putting student debt in the same category as child support and criminal fines.
As a tragic result, some students are turning to suicide because they are so overwhelmed by this financial burden and “student loan debt is so tough to get rid of.”
As Mint Press previously reported, Cryn Johanssen, founder and executive director of All Education Matters, wrote a blog last year about students turning to suicide to deal with massive student loan debt, and said she was stunned by the responses.
“Many of the folks who are incredibly deep in law school debt will end up killing themselves. I think, in the next one to three years, we are going to see absolutely massive numbers of law school graduate suicides,” wrote one person.
In response, groups such as the National Association of Consumer Bankruptcy Attorneys (NACBA) has asked Congress to pass legislation allowing college graduates to discharge loans they took from private lenders.
“There’s no way to defuse the bomb if the status quo stays the same,” said the National Association of Consumer Bankruptcy Attorneys (NACBA) Vice President John Rao.
“There are a number of things that can be done and seem to be relatively low-cost,” Lang said. “The most promising of these is replacing private loans that are guaranteed by the federal government with direct loans from the federal government.”
Student debt doesn’t just impact the borrower though.
According to the New York Federal Reserve report, fewer people are buying homes as a result of student loans.
“Having young people be able to come out of college and start businesses — or invest or save — is good for the economy,” said Jesse Crane, a College of Arts and Sciences junior at Boston College. “It helps build the housing market and generally encourages the flow of money.”
The fact that the student debt crisis could have a “debt domino effect” on the economy has garnered the attention of the Consumer Financial Protection Bureau (CFPB) who last week announced a new inquiry into ways graduates with private student loans could refinance.
CFPB Student Loan Ombudsman Rohit Chopra said that he doesn’t like the word “crisis” to describe the student loan situation, because it doesn’t have the ability to rattle the economy quite like the mortgage crisis did, but Chopra recognized the toll the loans were having on many young people and the economy.